Silicon Graphics Sells Itself to Rackable for $25 Million

Sadly, this is no April Fool’s joke. Silicon Graphics, the high-end computer computer workstation and server company founded by Jim Clark in 1982, today declared bankruptcy and sold itself to Rackable Systems (RACK) for $25 million plus the assumption of “certain liabilities.” In its bankruptcy filing, SGI listed debt of $526 million.

A decade ago, SGI’s revenues peaked at about $4 billion a year. Now it will be lucky to make one tenth of that, with a revenue run-rate of less than $400 million, and its losses are piling up. Rackable’s stock is down nearly 7 percent on the news. SGI’s high-performance, highly-proprietary, computing systems fell victim to the spread of cheap Linux boxes hooked up together with massive redundancies.

You don’t build Web-scale services on expensive proprietary boxes. You build them on cheap, open-source systems. Just ask Google (GOOG) (or Amazon (AMZN) or Salesforce (CRM) or anyone else).

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Comments

[Joe2:]

I don't get why this acquisition makes sense. Erick - if you can't build web scale services on expensive proprietary boxes (which I agree with 100%) then why does it make sense for RACK to buy these assets even if they are cheap? What's the thinking folks?

Apr 02 10:55 AM